Will the without prejudice rule apply to make settlement negotiations inadmissible as evidence?
EAT decision confirms guidelines on when a grievance might constitute an existing dispute.
Settlement agreements are a tool employers can use when seeking to resolve workplace problems. They can lead to a relatively quick resolution for all parties concerned and may avoid the need for lengthy internal procedures and expensive litigation in tribunals and courts.
To encourage parties to settle disputes themselves (avoiding the need for a tribunal or court to do it), the ‘without prejudice rule’ (the ‘rule’) can be used which means that any discussions about settlement will be ‘off the record’ and are not admissible as part of litigation should a court or tribunal later become involved.
However, the rule will only apply in specific circumstances and can be lifted in cases where it is abused. When determining if the rule applies, the following case law-established guidelines will help determine the issue:
- the rule only applies if there is an existing dispute between the parties at the time of the communication and that communication is a genuine attempt to settle the dispute in question;
- the rule can apply to pre-litigation communications if the parties contemplated, or might reasonably have contemplated, that litigation would ensue if they did not agree;
- the mere fact an employee raises a grievance is not determinative of whether there is a ‘dispute’; and
- the rule cannot be used to exclude evidence of ‘perjury, blackmail or other unambiguous impropriety’.
A recent case considered an argument by a former employee that the rule should not apply, and that evidence of settlement negotiations should be included as part of her claim.
Case: Garrod v Riverstone Management Ltd 
Mrs Garrod went on a period of maternity leave and a few months after returning she informed RML she was pregnant again. Not long afterwards, she submitted a formal grievance. She alleged, amongst other things, that she had not be able to return to the same job she left before going on maternity leave; that she had faced bullying and harassment by senior manager colleagues; and that those managers had discriminated against her on the basis of pregnancy and maternity.
Shortly after this Mrs Garrod went off work sick and was contacted by a HR representative of RML and invited to a meeting. At the meeting, Mrs Garrod was asked who she felt should oversee her grievance and what she hoped to achieve in terms of outcomes. The HR representative then said he was going to have a without prejudice conversation with Mrs Garrod and subsequently offered her a settlement under which her employment would terminate and she would receive a package of £80,000.
Further correspondence did not lead to a settlement. Eventually Mrs Garrod’s grievance was not upheld and she resigned from her job. She then brought claims for discrimination on the grounds of maternity, harassment, and for constructive unfair dismissal.
As part of her claim, Mrs Garrod introduced evidence regarding her meeting with the HR representative and the settlement offer, alleging that the HR representative had made it clear he did not care about her grievance and that his conduct was further evidence of her mistreatment and the discrimination she faced.
RML applied to amend Mrs Garrod’s particulars to remove mention of the offer on the basis that the without prejudice rule applied and, accordingly, the settlement offer should not form part of the record of the case. A tribunal judge ultimately agreed with RML.
Mrs Garrod appealed that decision, arguing that:
i) the without prejudice rule did not apply because there was no ‘dispute’ between the parties at the time the settlement option was introduced;
ii) if there was a dispute when settlement was raised it did not involve termination of her employment as Mrs Garrod was seeking to remain in employment; and
iii) there was unambiguous impropriety on behalf of RML when settlement was introduced, meaning the without prejudice rule should be lifted in respect of the meeting.
The EAT’s decision
The EAT dismissed all three grounds.
On ground i), the EAT ultimately found that the tribunal was entitled to find as a matter of fact that there was a dispute between the parties at the time the HR representative of RML and Mrs Garrod met. Mrs Garrod had submitted a grievance mentioning harassment, discrimination, breaches of statutory rights and so on. She had also referred in her grievance to ACAS mediation or Early Conciliation if her concerns could not be resolved internally. The tribunal noted that Mrs Garrod had a legal background and found that she must have understood that she was referring in her grievance to potential claims.
For ground ii) the EAT agreed with the tribunal that the disputes advanced in the grievance and in the subsequent litigation were one and the same. There was no need for the dispute to be “in relation to termination” for an offer including termination to be covered by the rule.
Finally, on ground iii) the EAT dismissed arguments that the tribunal had set the bar too high when it considered whether RML’s behaviour met the ‘unambiguous impropriety’ standard. Referring to case law, the EAT noted that the without prejudice rule would only be lifted in ‘the very clearest of cases’ and that the importance of maintaining the rule meant that only the most grave behaviour (on a par with perjury and blackmail) would result in it being lifted. The EAT commented that the act of simply making a settlement offer including termination of employment falls far below the threshold for unambiguous impropriety, even though it might, from the claimant’s point of view, suggest a discriminatory attitude.
This case highlights that it is crucial for employers to consider whether there is an existing dispute before any mention of settlement occurs. The question is whether the contents of a grievance or other complaints suggest that the employee is contemplating or might reasonably contemplate litigation arising from their concerns.
It also means employers need to be especially careful where the option of settlement arises in other circumstances. For example, if the employee is subject to disciplinary investigations and the employer wants to introduce settlement before a formal process is engaged, it is worth discussing with a specialist employment law adviser the best way to approach this and whether the offer of settlement could be viewed as prejudging the outcome of the formal process, whether the without prejudice rule is engaged, and if other options should be considered.
For further information on the without prejudice rule and protected conversations in the context of grievances, please see our article What should employers do if an employee raises a grievance about being offered a settlement agreement? (available on our website).
How Wrigleys can help
Our employment law specialists have extensive experience in advising clients in the public, charity and third sector how to deal with grievances, complaints and disciplinary procedures and regularly advise clients how to introduce and negotiate settlement agreements directly or via ACAS. This includes experience dealing with senior manager and executive terminations.If your organisation requires expert help or guidance on how to handle settlement options and how best to ensure your organisation is best protected when it does so, we would be happy to help.
If you would like to discuss any aspect of this article further, please contact Michael Crowther or any of the employment team on 0113 244 6100.
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The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.